The Australian dollar fell heavily overnight, weighed down by a resurgent greenback following a raft of strong US economic data.
Here’s the scoreboard as at 7am AEST.
AUD/USD 0.7899 , -0.0048 , -0.60%
AUD/JPY 87.07 , -0.14 , -0.16%
AUD/CNH 5.2118 , -0.0388 , -0.74%
AUD/EUR 0.6648 , 0.0011 , 0.17%
AUD/GBP 0.6112 , -0.0038 , -0.62%
AUD/NZD 1.0971 , 0.0023 , 0.21%
AUD/CAD 0.9967 , 0.0023 , 0.23%
After threatening to break above the 80 cent level in Asia following the release of Australian building approvals and construction spending figures which both beat expectation, the AUD/USD gave back all those gains and more in overnight trade as the US dollar strengthened.
The catalyst for the greenback’s gains was the release of strong US economic data during the session.
US Q2 GDP was revised up to a seasonally adjusted annual rate of 3.0%, exceeding expectations for a smaller increase of 2.7%, with consumer and business spending both coming in stronger than what was previously reported.
Ahead of this Friday’s US non-farm payrolls report, there was also good news on the labour market front with the ADP National Employment Report showing an increase in private-sector payrolls of 237,000 during August, easing surpassing forecasts for a smaller gain of 183,000.
It was the strongest increase in hiring reported in five months.
The strong data, assisted by stretched short positioning and renewed chatter than the European Central Bank may act to talk down the euro after its recent surge, also helped to underpin the US dollar’s rally.
As the largest component in the US dollar index, any weakness in the euro tends to see the USD strengthen against most major currency pairs, including the Australian dollar.
As a result, the AUD/USD fell to as low as .7888 before eventually closing the session at .7904.
There was little market reaction to a speech from Donald Trump on tax reform that delivered little in the way of new information. Nor did the markets react much to this tweet from Trump earlier in the session in relation to North Korea.
The U.S. has been talking to North Korea, and paying them extortion money, for 25 years. Talking is not the answer!
— Donald J. Trump (@realDonaldTrump) August 30, 2017
In what was a rarity, at least in recent months, traders saw little reason to sell the US dollar on Wednesday.
Whether that trend continues will likely be determined by the steady flow of economic data scheduled for release on Thursday.
In Australia, markets will receive another input into next week’s Q2 GDP release with private business capital expenditure figures out at 11.30am AEST.
This 10-second guide has further information on what to look out for if you’re trading around the release.
The Reserve Bank of Australia will also release private sector credit figures for July with most interest likely to fall on the split between owner-occupier and investor housing credit growth. It too will be released at 11.30am AEST.
Before those events arrive, China will also release manufacturing, non-manufacturing and steel industry purchasing managers indices (PMIs) at 11am AEST.
Later in the session, data highlights include German retail sales and unemployment figures, eurozone CPI and unemployment, Italian CPI, Canadian GDP and personal consumption and income figures from the US, including all-important core PCE inflation for July, the US Fed’s preferred measure on gauging price pressures.
A modest increase of 0.1% is expected.
Weekly jobless claims and the Chicago PMI will also be released in the US.